Australia consumer watchdog takes action on nutritional claims

Staying fit and healthy is likely to be on many people’s new year’s resolutions list and diet is a big part of it. Just when you thought you were getting a healthy snack that is advertised as nutritious, with images of fruits and vegetables on its packaging, you check the sugar content and find yourself holding a product that contains more than 60% sugar. The case in point is a child’s snack from Heinz. The Australian Competition and Consumer Commission (ACCC) feels so strongly about the case it is suing a food company for the first time over the sugar content in one of its products.

The commission is accusing Heinz, the US company, of false and misleading representations in relation to its Little Kids Shredz products. Lawyers Asialaw spoke to observe that the ACCC is paying more attention to misleading representations in health claims and businesses, especially in the food industry, should be vigilant about their advertising to avoid the reputational risk of deceiving consumers.

ACCC’s actions

Featuring images of fresh fruit and vegetables with statements such as “99% fruit and veg”, and “With our dedicated nutritionists who are also mums, we aim to inspire a love of nutritious food that lasts a life time”, the product came to the ACCC’s attention after a complaint from the Obesity Policy Coalition. The ACCC is seeking declarations, injunctions, pecuniary penalties, corrective notices and costs for the allegations on false and misleading representations. Both parties are preparing evidence for a hearing in the Federal Court of Australia in July. The ACCC brought proceedings against Heinz on June 20 2016. The company filed its defence the following month on July 25.

Charles Coorey

“The ACCC is expressing increased concern about deceptive conduct in labelling,” says Charles Coorey, partner at Gilbert + Tobin. “The case should raise a red flag for manufacturers and they should tread cautiously.”

“It’s the first time that the ACCC has taken action against a company regarding sugar content in a product,” says Alistair Little, partner at TressCox Lawyers. “The ACCC is pressing boundaries. It can’t be sure that it can win, but by trying to run a case, it may break new ground.”

“The ACCC’s aim is more focused on getting the order on corrective advertising notices, which is more damaging to a company as it needs to retract claims in the media that it has advertised in and this poses a bigger threat than a penalty,” adds Little.

Misleading claims

The Australian consumer law contained in the Competition and Consumer Act 2010 obligates companies to make sure that product claims do not mislead the public.

“The law can apply to any industry and on any claim,” says Coorey.

“While it is not necessarily wrong to say that the product is nutritious in the Heinz case, the overall packaging gives the impression that the product is good for you and can help to develop good eating habits,” says Little.

In a case relating to TPG Telecom, the federal court found that the company made misleading and false advertising claims in an advertising campaign concerning the costs of internet service. “The case illustrates that individual claims can’t be looked at on their own, but the overall impression the advertising has on consumers,” adds Little. “Although the advertising contained the necessary information, it was in small type.”

“Misleading representations damage competition,” says Coorey. “It gives unfair competitive advantage to companies and those competing on the same merits but not making misleading claims are disadvantaged.”

Similar cases in the food industry

The ACCC has been focusing more on misleading claims in the food industry. Similar cases have also been on the increase in the US and Europe. “The ACCC is one of the most active consumer and competition bodies in the world in taking action on misleading representation in where food comes from,” says Coorey.

Alistair Little

“In September 2015, Australia’s pork producers were fined over misleading labels on free-range pork and in April 2016, farms were fined for misleading claims on free range eggs, illustrating that the ACCC will not tolerate claims unless they are the truth,” says Little.

“In the recent cases of Unilever and Smith’s snacks, the companies were fined for making misleading representations on the packaging of popular products as being suitable healthy options for school canteens,” adds Little.

“In 2009, Coca Cola had an advertising campaign which ACCC viewed had the potential to mislead consumers on weight gain and obesity,” says Coorey. “The ACCC didn’t take the case to court, but Coca Cola agreed on undertakings to publish corrective advertisements.”

“The US and Europe have a significant number of food labelling lawsuits, many of which are class actions,” says Coorey. “There is a saying that food is replacing tobacco as the focus of lawsuits.”

The Court of Justice of the European Union handed down a judgment in 2015 interpreting the EU’s food labelling law in a case concerning Teekanne’s fruit tea, which did not actually contain the contents of vanilla and raspberries, as stated, only flavourings. The court found that the product label may mislead consumers.

The Heinz case should set off alarm bells for businesses in Australia, no matter what the result is. With the heavy focus on health claims, the food industry should be cautious. Businesses in other sectors need to develop consistent and clear approaches too, in how they are communicating information of products to consumers to ensure they are not misleading.